Devonport, the naval dockyard in Plymouth, is to be sold for £350 million to Babcock, the defence and engineering group.

Babcock’s proposed deal for Devonport, which maintains, upgrades and fuels the Royal Navy’s submarines, adds the facility to its existing Rosyth and Faslane submarine bases in Scotland.

Babcock also announced a £90 million share placing to help to fund the deal. The dockyard is set to change hands next month after approval from Babcock’s shareholders.

Devonport is presently owned by a joint venture of KBR, a subsidiary of US giant Halliburton, the Weir Group and Balfour Beatty. It has been run through the Devonport Management Limited (DML) joint venture since 1987. DML bought the dockyard a decade later.

Nearly half of DML’s income comes through refitting and refuelling nuclear submarines and it is the only base licensed to carry out refuelling work.

DML also provides operational support to warships and refitting for frigates, tankers and survey vessels. The firm employs about 2,600 people.

Several large warships are ported at Devonport as well as the Trafalgar class nuclear submarines.

Babcock is understood to have beaten a rival bid from US private equity firm Carlyle to buy DML, after earlier interest from defence rivals Rolls-Royce and BAE Systems.

The decision to sell Devonport comes after the Government’s review of the defence industry in 2005 called for consolidation in the maritime sector ahead of future demand for ships and submarines.

The company said that the deal would allow the transfer of skills between its existing bases at Rosyth and Faslane and Devonport.

Babcock added that the acquisition could lead to £4 million in savings this year through cheaper procurement and overhead costs, with opportunities for “substantial” operational savings in the long term.

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